Coffee drops on reports of big inventories

General Comments: Futures were lower on speculative selling tied to ideas of big stocks as seen in the GCA reports on Monday and on ideas of improving weather in Brazil. Some forecasts for rains to develop by the end of this week in growing areas of Brazil were negative because it will create good flowering conditions for the next crop. The current crop harvest has proceeded well under mostly dry conditions. Coffee is available in Central America as farmers and mills clear inventories before the next harvest. New crop is now being offered. Colombia is offering Coffee into the cash market at steady differentials after forcing them lower in the last few weeks. Buyers are said to be well covered and have been buying in Colombia and Peru as well as Asia. Current crop development is still good this year in most production areas of Latin America. Central America crop conditions are said to be good overall, but rust will cut production this year. In addition, Hurricane Ingrid will bring some very big rains to central Mexico this week and could damage crops. Colombia is still reported to have good conditions. Vietnam is seeing some flooding rains in production areas this week.

Overnight News: Certified stocks are lower today and are about 2.781 million bags. The ICO composite price is now 110.03 ct/lb. Brazil should get scattered showers this week. Temperatures will average near to below normal. Colombia should get scattered showers, and Central America and Mexico should get showers and rains. Big rains are likely in central and south central Mexico. Temperatures should average near to above normal.

Chart Trends: Trends in New York are down with objectives of 112.00, 111.00, and 106.00 December. Support is at 114.00, 111.00, and 108.00 December, and resistance is at 121.00, 122.00, and 125.00 December. Trends in London are down with objectives of 1620 November. Support is at 1660, 1630, and 1600 November, and resistance is at 1720, 1735, and 1750 November. Trends in Sao Paulo are down with objectives of 123.50 December. Support is at 137.00, 134.00, and 131.00 December, and resistance is at 139.00, 140.50, and 142.50 December.

General Comments: Futures closed a little higher in response to the FSA data that showed some Cotton area had not been planted. The report gave ideas that production might not be as strong as originally expected. US crop development remains behind due to delayed planting this year, but crop conditions right now are generally good with moderating temperatures and rains in the forecast for Texas this week and dry weather in the forecast for the Delta and Southeast. The weather forecasts and the crop progress and condition reports offer no concerns for production at this time. Weather for Cotton still appears good in India and Pakistan, and harvest should be starting there. Cotton in China is seeing rain that could hurt quality.

Overnight News: The Delta will see some storms on Friday and Southeast will see showers this weekend. Temperatures will average near to above normal. Texas will see scattered showrs again at the end of the week. Temperatures will average above normal. The USDA spot price is now 81.50 ct/lb. ICE said that certified Cotton stocks are now 0.015 million bales, from 0.015 million yesterday.

Chart Trends: Trends in Cotton are mixed. Support is at 83.55, 82.95, and 82.45 December, with resistance of 85.15, 85.55, and 86.25 December.

About the Author

Jack Scovilleis a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988. Jack writes daily commentaries - Morning Grains and Softs, in both English and Spanish and is regularly quoted around the world by news & wire services including Dow Jones, AP, Bloomberg, and Reuters. You can contact Jack by phone at (312) 264-4322 or by email at jscoville@pricegroup.com. Learn even more on our website at www.pricegroup.com.

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